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Stephen Green: Bankers Need A Moral Compass

With bank bailouts and executive bonuses in the headlines, it's hard to find the connection between banking and ethics.

But it's an argument that Stephen Green, chairman of HSBC — one of the biggest banks in the world — makes in his new book about banking: Good Value: Reflections on Money, Morality and an Uncertain World.

Green is also an ordained priest in the Church of England. In his book, he proposes a "new capitalism" that brings good business and good ethics together. He says moral and spiritual values should take precedence over immediate profit.

In an interview with Renee Montagne, he touched on some of the topics he explores in his book.

The Road To Crisis

"First of all, it is important to understand that the crisis didn't come out of nowhere," Green says. "It came out of a global macroeconomy, which was getting increasingly imbalanced."

Green says the imbalance was caused by emerging markets in places like Asia that were exporting, saving too much money and spending too little domestically. Then, consuming nations like the United States and the U.K. were spending too much and saving too little. In that context, there was a pervasive atmosphere, he says, where institutions didn't ask a lot of questions about what was the suitable, fair or right thing to do, provided that they found a legal market for the financial product they were offering.

Bonuses And Executive Pay

"When you look at the compensation practices in the financial industry there were clearly distortions," Green says. He adds that it is "entirely understandable" that there's widespread public anger over executive pay, especially in cases of companies that collapsed.

"The important way forward is to properly align the interests of the trader, with the shareholder and the wider public interest," Green says." Real performance, he adds, should be rewarded with pay that is competitive and that takes into consideration market trends.

The Role Of Company Boards

"The responsibility of the board is to grow the business on the basis of a sustainable business model for the foreseeable future," Green says. He says this is accomplished by providing good customer service to customers on a transparent, open basis, by having engaged, committed employees, and by ensuring that a company pays attention to its community responsibilities.

"The big learning of this crisis is that the markets are not reliably self-policing, and you do need [a] government supported regulatory environment, which is constructive and effective in watching out for the weaknesses that are sometimes endemic to the system," Green says.

Money: The Root Of All Commerce

"You can't have sustained social and economic development without money, without commerce," Greene says. "You need money to lubricate the commerce, to finance investment and all the rest of it. It's an incredible effective servant if it's allowed to operate in the right ways as a servant. It becomes very dangerous when it's a master."